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JLP8517
New Member

Owner-occupied duplex convert to 100% Rental

My 2 family property was "Owner Occupied" from 2000 to 2012.  Depreciation was set up at 50% by an accountant the first year I owned the property.  From 2001 on, I've used TurboTax mirroring the accountant's 50% calculation.  In 2012 when I rented my unit, I didn't realize that I should have change the depreciation to 100% (Which I believe would have given me a bigger refund, but oh well...).  Now I'm thinking of selling the building, so while trying to figure out what I'd owe in Capital Gains on the depreciation, I discovered this error and I'm not sure if this is going to cause a problem.  Just wondering if anyone out there had any experience with a similar situation or if anyone could give me any tips.  

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3 Replies
Carl
Level 15

Owner-occupied duplex convert to 100% Rental

Since the error started more than 3 years back, you flat out can't use TurboTax to fix this problem. To fix it and minimize (or possibly eliminate) the potential back-taxes fines and penalties, you need to file IRS Form 3115 - Change of Accounting Method. While the TTX program does include this form, unless you are a tax professional it's highly recommended you seek professional help for this. The 3115 can be *very* complicated and even the smallest of mistakes can turn the mistake you're trying to fix, into a never ending nightmare with the IRS from which you will never awaken. Please seek professional help this year, and do it now. Don't wait until it's time to file your 2019 tax return either. The longer you wait, the more costly this can be.

Owner-occupied duplex convert to 100% Rental

What you should have done was enter the other 1/2 of the rental as an asset so each 1/2 would have different start dates...do seek professional assistance to right this error and get the depreciation deduction now on the 2019 return.
JLP8517
New Member

Owner-occupied duplex convert to 100% Rental

Thank you both for the information~! I will contact the CPA that did my taxes the first year I owned the property.

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